Borsa Italiana sets out HFT controls
Borsa Italiana, the Italian subsidiary of the London Stock
Exchange Group (LSE), has set out details of a new pricing regime designed to penalise
high-frequency traders and other firms with a high order to cancel ratio.
From 2 April, the new pricing regime will impose limits and
fees on orders entered in excess of an order to trade ratio (OTR) of 100:1 for
instruments listed on its equities market MTA and 40:1 across its MIV
investment vehicles market and AIM Italiana – MAC platform for small and medium
For each order sent in excess of the ratio, Borsa Italiana
will charge the trading firm at a rate depending on how badly it has exceeded
the ratio. For one to five times the OTR, the fee is €0.01; for five to ten
times the OTC the fee is €0.02; and above ten times the OTR, €0.025 will be
In addition, there will be a daily cap at €1,000 for
instruments traded on each of Borsa Italiana’s respective platforms.
The planned introduction of the new fee structure follows a
request by Italian regulator Consob last year, in which the regulator called on
Borsa Italiana to take action to curb the “excessive” numbers of orders being
entered by some HFT participants. HFT firms typically send out large volumes of
orders, cancelling the majority.
Proponents of HFT argue that it helps increase liquidity by
boosting volumes on Europe’s trading venues and by contributing to narrower
spreads by arbitraging away price inefficiencies. Opponents counter that HFT
may be harmful to the interests of long-term investors, by promoting the
fragmentation of liquidity and by feeding on slower-moving institutional
Regulatory measures aimed at controlling HFT are currently a
possibility in several European countries. France is currently pushing forward
with a financial transaction tax proposal that would charge 0.1% for failed,
cancelled or modified orders, reduced to 0.01% if they stay below a certain
A European Commission proposal for a Eurozone financial
transaction tax is also under consideration, with member states to implement
the tax by the start of 2014, should it be successful. After the European
Parliament has offered its opinion, a plenary vote will be held in May.
Borsa Italiana is due to move its equities matching engine
back to Milan in Q2 2012 – a move timed to coincide with the bourse’s adoption
of the LSE’s new Millennium Exchange trading platform, which was introduced
for the UK market in February 2011.
Guiseppe Vegas, head of Italy’s Consob, recently
hit out at the LSE's 2008 takeover of Borsa Italiana, on the grounds it
had not fulfilled expectations either in Italy or London. Cross-border
capital flows and investment in Italian companies had yet to increase as a result
of the deal, he said.